A settlement is a place where people live together. It can be as tiny as a couple of houses, or as large as a great metropolis like Los Angeles and London. There is no hard and fast rule about what you call a place. It varies from country to country. But here is a rough geographer's guideline:
The smallest places are sometimes called hamlets. They have no shops or, if they do, it might just be the odd one.
A village is a bigger place, with several shops and other businesses including perhaps a doctor's surgery, a pharmacy, a small supermarket, a dry cleaners, a pet shop and so on.
A town is bigger still. It may well have a town hall, and it will have at least one street in the middle which is lined with shops. Towns can be very large, with many shopping streets and a business district.
Large towns grade up into cities. A city will have department stores and other things like theatres and concert halls and probably a football stadium.
Cities can spread out and include very large suburbs. They may sprawl out to include what used to be other towns and cities. These are called metropolitan areas. They can contain tens of millions of people.